Egypt using development finance to boost private sector

CAIRO: Egypt will push development financing as a way to expand private sector engagement, leveraging support obtained during the coronavirus pandemic, with a focus on green projects and sustainable growth, the international cooperation minister said.

The government wants the private sector to play a bigger role, though non-oil private investment and private-sector activity has lagged, and stake sales in state firms have been delayed by market downturns and the pandemic.

State-led economic activity has helped cushion the economic impact of COVID-19.

Egypt is well placed to tap cheap, long-term development financing from lenders like the European Bank for Reconstruction and Development (EBRD), the International Finance Corporation (IFC) and the European Investment Bank (EIB), which can bolster the private sector while raising governance and environmental standards, International Cooperation Minister Rania al-Mashat told Reuters.

"As we continue to push the frontiers with a green recovery, with an energy strategy that moves into renewables even more forcefully, there are venues, very attractive venues, for such financing, not just for government projects but also for private sector projects.

"And we have announced that 2021 for us is the year of more private sector engagement."

Egypt has a development finance portfolio of nearly $25 billion, attracting $9.9 billion in 2020, a third of which was directed to the private sector, Mashat said. Development financing represents about 10% of public debt and 25% of external debt, she added.

Much of the funding has gone to areas such as transport, infrastructure, water and renewable energy.

Egypt implemented major reforms from 2016 under a three-year IMF loan programme, devaluing the currency, cutting most energy subsidies and imposing a value-added tax.

The reforms were praised for stabilising the economy, but critics say many poorer Egyptians have not felt the benefits and have questioned the prospects for job-creating growth.

In June 2020, Egypt agreed to a $5.2 billion standby loan with the IMF that aims to encourage private sector engagement and structural reform.

"One of the goals or principles of this programme is private sector engagement and structural reforms that actually try and address some of the challenges or impediments so that we pave the way for more growth and more employment," Mashat said.